A year has passed since the government launched the Goods and Services Tax (GST), but the restaurant and hotel industry in the state continues to cite some major concerns due to the tax structure .
Hotel and Restaurant Association of Western India (HRAWI) president Dilip Datwani said, “GST initially came as a shock for the industry due to the variable tax bracket based on the hotel room tariffs. The tax rate for eating out at restaurants was declared at 18%. It was later brought down to 5%, but without Input Tax Credit. This is still a concern.”
He added that non-availability of Input Tax Credit a big issue for enterprises since they can no longer set off expenditures on capital investments and rentals that are huge, especially in big cities.
“There were many grey areas that caused uncertainties. However, some of those were clarified and resolved over time by the GST Council. The high rate (28%) continues to remain a concern as stays a are expensive for both domestic and international Tourists prefer travelling to our neighbouring countries such as Sri Lanka, Bhutan or even Thailand over India because these nations have lower taxes compared to what we have,” Datwani said.
For group travellers, he said, India is not viable on of the high GST. “Tourists can stay for a longer duration in a country like Sri Lanka as against the same expenditure in India because of the high GST. One of the major issues for meetings, incentives, conferences and exhibitions (MICE) in the hotel industry has been the unavailability of Input Tax Credit benefit for the corporate sector,” he said.
The HRAWI has been requesting the government to allow enterprises to provide set off against taxes spent for business activities in different states.“There was a nominal slump on account of compliances issues issues initially, which created confusion but that has sorted out now. The biggest worry is losing out on tourism because of high taxes. We hope that the government will consider it,” said Datwani.
The hospitality industry has also expressed concerns concerns over the significant number of cancellations in the MICE segment across the country. The unavailability of IGST is discouraging many organizations from holding their events away from their home stateswhere they are registered under GST.Many others are considering conducting theirMICE activities in the neighbouring South and East Asian countries on account of both lower taxes and tax credit before exit.
“We have put forth this particular concern as one of the biggest threats to the emerging Indian MICE market in India.The unavailability of IGST credit for immovable properties for tourism purposes such as for hotels and establishments is negatively impacting a huge business tourism movement in the country. Barring some companies in the business of FMCG or services, not all corporates are registered across all States in India and are reconsidering conducting their MICE related activities. A consequence of this is evident in the pattern of cancellations and the sharp drop in booking for MICE across the country,” an HRAWI office bearer said.